The shape of things to come

As part of WWT's 50th birthday edition, we invited people from some of the industry's key organisations and companies to assess the present and future state of the water world

Pamela Taylor, chief executive, Water UK
The water sector is the focus of intense interest and a period of great upheaval is predicted. Major questions abound, but let's not get carried way. Amid potentially radical changes, the key constants of our business will be unaffected: the qualities which for a decade have brought huge benefit to the nation's economy and quality of life.

The ingrained ethos of public service has not and will not be compromised by more commercial trading conditions. Operator relationships with government and regulators, owners and customers, will sometimes be strained, but in delivering its core responsibilities the industry will always seek to work harmoniously with its stakeholders. Water UK companies are world leaders. Expect an even greater determination to match the best for innovation and quality as markets open up. The companies' experience of solving environmental problems will grow in the future, not least because in a dirty world its true value will come to be better appreciated and priced accordingly.

Yet the prophets of big change will not be disappointed in their analysis of the water sector at a turning point. Structural change and growing market competition will reshape our industry. The seeds of the coming seismic shift were as much in the destabilising AMP3 settlement as the Competition Act and government policy. Will common carriage develop or, as Water UK believes is likely, will markets be created in newly separated horizontal business functions? Will the vertically integrated water operator persist in the face of multi-utility models on the one hand and pressure to increase efficiency by disaggregating functions on the other? Will ownership across the country remain shared between the public sector, UK-listed and non-UK companies, or will other forms - mutual or not - appear? These and other options are currently embraced within a diverse industry, which is nevertheless of one mind when it comes to building on the achievements of recent years.

In making their responses to such questions, wise regulators and ministers will re-think current restrictive policy and 'let many flowers bloom'. Given an approach of this kind, the UK industry has an innovative and successful future. There will be increasing demand for its skills and experience worldwide. The value and price of its products and services will move into better balance as people grow more aware of the industry's role in creating a better environment. An important reason for this change of perception will be the empowerment of individual citizens and businesses as consumers of water services by the growth of genuine competition.

In 2050 Water UK expects people to read of organisations and people who, in the early years of the century, laid the foundations for a modern business with a high profile role in delivering society's health and happiness.

Mark Studholme, engineering director, Biwater Treatment
Eight months into AMP3 the agenda for water and sewage treatment during the next five years is clear. On the drinking water front the issue of quality at the tap is paramount. Companies will be addressing the twin challenges of ensuring their supplies comply with the new drinking water quality regulations and eliminating Cryptosporidium.

Solutions for Crypto removal run the whole gamut from tried-and-tested granular activated carbon filtration through to the latest in membrane technology. In sewage treatment, 'concrete palaces' are history for the foreseeable future, as the urban wastewater treatment directive (UWWTD) focuses on secondary treatment for smaller populations.

Contractors who wish to thrive will have to offer 'small-is-beautiful' solutions. Examples from Biwater's own portfolio include the Bistar rotating biological contactor, the compact oxidation ditch process we are building on the Scottish island of Rothesay and Bifad, a flexible 'fill-and-draw' tank-based system. Improvements to combined sewer overflows (CSOs) are another UWWTD imperative as water companies tackle the Environment Agency's (EA) list of systems requiring attention by 2005. In response, Biwater has drawn together the engineering disciplines needed for optimum CSO performance. Sludge disposal will continue to challenge the ingenuity of the industry. The likely strategy is a combination of volume reductions, by dewatering, thickening and digestion, and pathogen treatments which yield a material suitable for agricultural use under the sludge matrix.

The most significant development over the next five years will probably be widespread adoption of membrane treatment, now a cost-effective way of achieving low surplus sludge volumes in tandem with a high quality effluent which can be further enhanced with UV disinfection. Membranes may also be beneficial in reducing endocrine disruption substances, which will no doubt be a significant part of the discharge legislation of the future.

Predicting AMP4 is hazardous. Steam or chemical sterilisation could be the next step for sludge treatment. In wastewater, membranes will find a new role in processing grey water for reuse, and the emphasis will shift from secondary to tertiary treatment, creating new opportunities for continuous-flow filter systems. AMP4 and AMP5 could also herald an era of refurbishment and optimisation as water companies strive for the best possible performance from two decades of investment in their sewage collection and treatment infrastructure.

At this point the crystal ball clouds over, but there are three things we can be sure of. Technology will continue to develop; legislation will become ever more stringent as customer expectations rise; and the water process engineer will need to be light on his feet in order to keep pace. Sounds familiar?

Beryl Brown, head of competition policy, Ofwat
Ofwat is creating a framework for competition so customers have choices. Competition will stimulate efficient use of resources, so all customers can benefit from reduced costs and improved service.

Customers already benefit from the contracting out of services, an important part of competition. Companies can cut costs as a result of having more choice in how to carry out their functions. The benefits of this are ultimately passed on to customers. The Competition Act has proved an effective catalyst for greater competition and has helped in the development of common carriage.

The water industry is leading the development of common carriage, with a little encouragement from existing legislation and guidance from Ofwat. Companies must be fully prepared to respond substantively to common carriage enquiries, and have now published their access codes.

Under current legislation, there is no restriction on the type of customers which can benefit from common carriage. In practice, larger businesses may initially present more attractive opportunities for competing suppliers.

But there are other ways in which customers can benefit from increasing competition now companies are free to pursue options such as:

inset appointments, where a customer chooses another undertaker to replace the incumbent. The threshold for large user insets recently fell to 100Ml. This means that over 1,000 more large users, such as hospitals, airports, universities, breweries and food manufacturers can change their water and sewerage company. Eight inset appointments have been granted, seven of these in the last two years. Anglian Water recently launched h2go, a new company set up to pursue competitive opportunities initially by obtaining inset appointments,

differentiated tariffs, where customers can choose the service and tariff that meets their need and reflects the costs of the service provided to them,

on-site management, where a customer can be helped to manage consumption more effectively, or reduce the volume and strength of trade effluent making it cheaper to treat. For example, Enviro-Logic has proposed innovative environmentally friendly water supply schemes which involve reusing grey water. HJ Heinz recently appointed Thames Water as the strategic manager of its water and wastewater services at its food production plant in the North West,

account management, where a customer can have all of their water and sewerage services managed under one account.

Cross-border supplies are having an impact too. Recently, Thames announced it would provide a cross-border supply to Brands Hatch motor racing circuit, which is situated on the border between two companies. The customer estimates a saving of around 20% on its annual water bill and expects to receive a more reliable service. This arrangement came about without intervention from Ofwat and proves customers can exert pressure on suppliers and, if they fail to get a satisfactory response, really can vote with their feet.

John Aldridge, sales director, Paterson Candy
The regulatory requirements for AMP3 are clearly defined. For water treatment the main drivers are Cryptosporidium, the new lead standard and reduction of coloured water supplies. For wastewater there is the UWWTD for populations of under 15,000, nutrient removal in sites of special scientific interest (SSSIs), some first time sewerage, plus a large number of CSO upgrades.

Most Crypto programmes involve improving monitoring, enhancing existing filter performance with better flow control and washwater handling, or membrane installation for high-risk supplies. Reliable new micro and ultra-filtration systems now make the latter look viable. Lead compliance centres on phosphate dosing or pipe replacement. Tap water quality is as much a function of the distribution network as of WTW efficiency, replacing or relining corroded iron mains will constitute a large part of the capital spend during AMP3.

The building of large coastal secondary treatment plants, often with regional sludge treatment centres, will largely cease at the compliance date of December 31, 2000. The UWWTD programme will continue, but the technology applicable to the smaller towns will be markedly different. This is the domain of packaged, pre-engineered designs, often built in steel or glass reinforced plastic (GRP) for ease of construction and reduced cost. At this scale, membrane bioreactors become an economically defendable solution. The number of sites in the CSO programme is staggering, and achieving the required outputs in time will be interesting to say the least.

So what measures are being put in place to address these challenges? With a few exceptions, most water companies have sought a closer relationship with a small number of partners, framework contractors or service providers. The processes involved in these selections have been fascinating, the challenge has been to select enough partners to give a measure of benchmarking and comparative performance, while ensuring sufficient work for each partner.

With a fairly severe final determination from Ofwat, water companies are having to deliver capital programmes at 25-30% less cost than in AMP2. Since pressurising contractors' and suppliers' margins can never achieve this level of reduction, it is a question of "how can you help us spending nothing, or as little as possible." Sweating the asset is a common phrase. Modelling techniques will play a major role in AMP3. Process models such as Biowin or Stoat will allow designers and contractors to evaluate the true performance potential of existing assets, identify the pinch points, and provide the minimum amount of new plant to meet the revised requirements. Tools such as Vissim allow filter flow performance to be evaluated so the requirements of Badenoch can be guaranteed from the revised system.

Who will be the players during AMP3? The emphasis on quality will ensure a place at the table for process contractors, and the large volume of work to be undertaken on underground assets should maintain the interest of the civil contractors. But will exclusion from frameworks, coupled to an increasing spend in areas such as the road programme cause some contractors to move out of the sector?

Water companies claim their spend profiles have been constant during the transition between AMP2 and AMP3. But in reality, the spend during 2000 has almost entirely been on projects committed during 1999. There have been precious few new construction starts in 2000. AMP3 will be challenging, we should be thankful to live in such interesting times